BSP digital currency pilot shows promise for large-value payments

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP)’s pilot test for a wholesale central bank digital currency (CBDC) showed that digital tokens can help banks settle large-value transactions beyond normal business hours, but the central bank still needs to address legal, regulatory, cybersecurity and scalability issues before any full rollout.

In its Project Agila report, the BSP said the pilot showed that distributed ledger technology and tokenization could be used to issue central bank money and support off-hours interbank transfers through a programmable ledger.

“These innovations both strengthen existing payments infrastructure and create opportunities for new financial services that could address evolving needs within the national payments ecosystem, particularly for financial securities settlement and cross-border transactions,” the BSP said.

Project Agila is the BSP’s wholesale CBDC initiative, which explores the use of digital central bank money for transactions among financial institutions.

Unlike a retail CBDC meant for the public, the wholesale version is designed for banks and other institutions that settle large-value payments.

The pilot involved BDO Unibank Inc., China Banking Corp., Land Bank of the Philippines, Rizal Commercial Banking Corp., Union Bank of the Philippines and Maya Philippines Inc. Observer institutions for later phases included Citibank N.A. Manila, China Bank Savings, Wealth Development Bank Corp. and SeaBank Philippines Inc.

Under the sandbox setup, financial institutions could request the issuance of wholesale CBDC tokens and transfer these to other participating institutions based on available balances.

The central bank said the system could support round-the-clock inter-institutional fund transfers, with smart contracts allowing automated token transfers based on predefined rules. The platform also used a consensus mechanism to validate transactions and prevent double spending.

The system processed 105,000 transactions in nine hours and 42 minutes during scalability tests, with an average elapsed time of 1,490.51 milliseconds and an error rate of 0.03 percent. This compares with PhilPaSS Plus, which processed an average of 6,789 transactions daily in the first quarter of 2025.

Still, the BSP said additional work would be needed if the platform were used for more voluminous cases, such as 200,000 or more daily transactions for cross-border payments.

The report said the central bank would need configuration adjustments and further system optimization “to ensure that scalability shall not be adversely affected by the rise in expected transaction volumes.”

The BSP also identified several areas for improvement, including faster transaction finality, stronger notification systems, finality certificates, dispute resolution rules and cross-system finality guarantees once the system is integrated with PhilPaSS Plus.

On cybersecurity, the report called for stronger safeguards such as multi-factor authentication, enhanced application programming interface security, multi-layer data encryption, application registration and advanced disaster recovery capabilities.

Despite these gaps, the BSP said a wholesale CBDC could improve liquidity management by enabling immediate fund transfers during off-hours and weekends. It could also reduce pre-funding requirements, support near real-time payments and serve as a business continuity facility if PhilPaSS Plus is unavailable.

However, the BSP acknowledged that issuing a wholesale CBDC would bring new risks and require updates to existing rules. Since the platform would likely be BSP-operated and handle large-value transfers, it may be designated as a systemically important payment system under the BSP’s payment system oversight framework.

The BSP said it would formulate a CBDC strategic roadmap, identify policy goals and success measures for each use case, continue engaging banks and payment system stakeholders and coordinate with multilateral organizations and central banks that are more advanced in CBDC development.